UPDATE 1-India imports push trade deficit to $20 bln for January

NEW DELHI, Feb 13 (Reuters) - India's trade deficit rose to
$20 billion in January from $17.7 billion in the previous month
as imports surged while exports rose only slightly, adding
pressure to a widening current account deficit and limiting the
scope for further interest rate cuts by the central bank.

India's exports rose an annual 0.8 percent to
$25.59 billion in January, while imports for the month
rose 6 percent to $45.58 billion, a senior trade
ministry official said on Wednesday, fuelled by oil imports.

"The oil import bill is definitely a challenge, but for a
growing economy, energy needs have to be met," Commerce and
Industry Minister Anand Sharma said at an event in Mumbai.

Oil imports rose 6.9 percent from a year ago to $15.9
billion.

India's current account deficit touched a record high in
September at 5.4 percent of GDP due to slowing exports and heavy
oil and gold imports.

Worried that India's ability to fund the rising current
account deficit is becoming increasingly stretched, and will
lead to fresh pressure on the rupee, the central bank warned
after a 0.25 percentage point reduction in its policy interest
rate last month that future rate cuts will depend upon the
current account gap narrowing and inflation subsiding.

Exports between April and January fell 4.9 percent to $239.7
billion. India's exports have fallen since last year as demand
slowed from key markets.

On Monday, Reserve Bank of India Governor Duvvuri Subbarao
reiterated his concern about financing the current account
deficit with volatile capital flows, and he projected the
deficit to touch a record high for fiscal year 2012/13, ending
in March.

Many analysts expect the current account deficit to be
around 4.5-5.0 percent of GDP in 2012/13, higher than 4.2
percent previous year.

"The high current account deficit is unsustainable as it
can't be funded for a long time with capital flows and it will
get adjusted through the exchange rate," said A Prasanna,
economist, ICICI Securities Primary Dealership. "The exchange
rate will depreciate when the correction happens."

The Indian rupee touched its lowest in over a month
in early January at 55.38 to the dollar, but has since recovered
on capital inflows.

Portfolio inflows into India were robust in Asia's third
largest economy at $31.41 billion in 2012 and $8.34 billion so
far in 2013.
(Reporting by Matthias Williams, Arup Roychoudhury amd Neha
Dasgupta; Writing by Suvashree Dey Choudhury; Editing by Tony
Munroe and Simon Cameron-Moore)